Thursday, April 23, 2015

Half of U.S. fracing companies will be dead or sold this year

Half of U.S. fracing companies will be dead or sold this year: "Half of the 41 fracing companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International said. There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracing, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices. There were 61 fracing service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton announcing plans to buy Baker Hughes in November for $34.6 billion and C&J Energy Services buying the pressure-pumping business of Nabors Industries Ltd. Weatherford, which operates the fifth-largest fracing operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow. Oil companies are cutting more than $100 billion in spending globally after prices fell. Frac pricing is expected to fall as much as 35% this year, according to PacWest, a unit of IHS Inc. While many large private-equity firms are looking at fracing companies to buy, the spread between buyer and seller pricing is still too wide for now, Alex Robart, a principal at PacWest, said in an interview at CERAWeek."

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